Q: My husband and I were stunned when the auditor began to read his report at our annual general meeting. We found out the reserve fund study was not updated every three years as required. We also found out total funds are not up to where they should be to meet future major repairs and replacements. The auditor went on to explain that this is a breach of the Condominium Act of Ontario and he is obligated to inform the owners of this situation. Will our condo face special assessments or condo fee increases because of the director’s oversight or negligence?

Future financial planning for major repairs and replacements should be the top priority in any condominium community. Reserve fund studies cannot be overlooked under any circumstances. Once the study is completed, it will indicate approximately how much money should be deposited into the reserve fund account. Reserve fund accounts are the financial backbone of all corporations.

Without proper reserve funds you could face special assessments or a significant increase to your monthly condo fee. If there’s a major repair to be completed and not enough money to fund the repair, owners will have to dig into their own pockets and pay their share of the cost. Special assessments have no cap on them and they can range from hundreds of dollars to thousands of dollars. Unfortunately, this could cause undue hardship for those on fixed incomes.

Board members must ensure that their condo corporation complies with the Condominium Act of Ontario. Otherwise the board runs the risk of being sued by an owner who may lose his/her sale of their unit because of the lack of funds and improper reserve fund studies indicated in the Status Certificate report.

It could become quite risky for board members who purposely avoid reserve fund studies. Since they would not be acting honestly and in good faith it could prevent the directors from being indemnified under the condo corporation directors and officer’s liability insurance.

It’s essential that your board of directors heeds the audit report and gets your condo back on track. The board must hire a professional to conduct and update your reserve fund study as soon as possible. If the directors refuse to conduct an updated study, then at least 15% of the owners need to sign a petition to requisition a meeting of owners as outlined in section 46(1) of the Condo Act to discuss and rectify this situation.